Monthly Archives: April 2011

Donald Berwick, Medicare, and Rationing

Earlier this week, CMS Administrator Donald Berwick was quoted in Politico as saying that the House Republican budget plan for Medicare amounts to rationing.  Some may view these comments as more than a bit rich, seeing as how much of Dr. Berwick’s academic career focused on determining the cost-effectiveness of various treatments.  For instance, over the years Dr. Berwick has published journal articles evaluating the cost of “adding a year of life” to low-birthweight babies.  Congress has yet to receive an answer to the simple question:  If Dr. Berwick doesn’t believe in rationing care, then what exactly was the point of all these cost-effectiveness studies he undertook – were they all conducted just for fun?

Second, some may view it as HIGHLY hypocritical for Dr. Berwick to have spent so much of his career talking about all the “waste” in the health care system, only to turn around and criticize Republicans for wanting to withdraw care by reducing some of this “wasteful” spending.  Dr. Berwick has repeatedly said up to half of all health expenses are “waste,” and as recently as 2008 stated that national health spending should be about 8% of GDP – less than half of where it is now. (A sampling of his quotes are below.)  Did the House Republican budget suddenly made Dr. Berwick believe that all this “waste” is now essential spending – or does Dr. Berwick’s objection stem from the fact that the Republican budget lets PATIENTS AND DOCTORS make the choice about what is and is not essential spending, rather than government bureaucrats like him?

Dr. Berwick actually conceded the latter half of this inconsistency himself, in an op-ed published in this morning’s Wall Street Journal in which he attempted to claim the Administration’s plan for Medicare reform was superior to the Ryan budget.  He talked about improvements in efficiency that have been made in private markets:

Improving quality while reducing costs is a strategy that’s had major success in other fields.  Computers, cars, TVs and telephones today do more than they ever have, and the cost of these products has consistently dropped.  The companies that make computers and microwaves didn’t get there by cutting what they offer: They achieved success by making their products better and more efficient.  We can do the same when it comes to health care.

Of course, there is a BIG difference between health care and the other areas Dr. Berwick discussed – they don’t have government paying a good portion of the bills, and federal bureaucrats micro-managing firms’ every move through various mandates and regulations.  In addition, consumers have the information they need to make smart choices (information which is currently lacking in many sectors of health care), and firms have financial incentive to improve, because they know they will lose business if they do not.

Dr. Berwick’s op-ed this morning was designed to bolster the case for the Administration’s position that only government bureaucrats are sophisticated enough to manage (or micro-manage) the nation’s health care system.  But by correctly pointing out that health care should look more like sectors in which consumer power drives innovation, Dr. Berwick actually undermined the White House’s own argument.

Hypocrisy, Health Care, and Entitlements

Late last week the Post’s Ezra Klein wrote a blog posting talking about all the ways Republicans have supposedly flip-flopped since the health care debate, largely in regard to the House Republican budget.  First off, some may find it more than a bit ironic that Klein alleged Democrats HAVEN’T been hypocritical on health care, given all of Barack Obama’s noteworthy flip-flops since 2008, a mere sample of which are included below my signature.

More to the point, Klein (and others) have criticized the House Republican budget for retaining the health care law’s reductions in Medicare spending, given that the Medicare actuary and others have suggested some of these reductions might be unsustainable in the long term.  However, the House budget also repeals the law’s $2.6 trillion coverage expansion.  Therein lies the BIG fiscal difference between the House Republican position and the Democrat-passed law:  If all the Medicare reductions can’t be sustained under the House Republican budget, the deficit still gets reduced – just not by as much as originally projected – while under the Democrat-passed law, the deficit will INCREASE, because all the “savings” (regardless of whether or not they will actually materialize) have already been spent.

Given all of this, it’s reasonable to ask:  Which party has been more responsible fiscally – and more responsible politically?

 
Candidate Obama vs. President Obama on Health Care

  • Candidate Obama repeatedly promised to cut the average family’s premiums by $2,500 per year – but according to the Congressional Budget Office, the bill he signed into law will RAISE premiums in the individual market by $2,100 per year.
  • Candidate Obama promised his health care plan would cost “$50-65 billion a year when fully phased in;” CBO now projects that the REAL cost of the coverage expansions will be $229 billion in 2020 and $245 billion in 2021 – four times the levels of spending promised.
  • Candidate Obama openly derided an individual mandate, asking Hillary Clinton whether she planned to garnish people’s wages, and arguing that “If a mandate was a solution, we could try that to solve homelessness by mandating everyone buy a house.”  Yet President Obama supported a mandate, “absolutely reject[ing]” the notion it was a tax increase, only to have his Administration argue after the bill passed that it was.
  • Candidate Obama made repeated campaign promises about televising the health care negotiations on C-SPAN – a promise which was never seriously kept, and which then-Speaker Pelosi publicly mocked.
  • Candidate Obama promised that “you will not have to change plans,” but the Obama Administration’s own estimates revealed that half of all employers – and as many as 80% of small businesses – will be forced to give up their current coverage.
  • Candidate Obama made a “firm pledge” not to raise any taxes on the middle class – a pledge which even Democrats admitted that President Obama has broken.

Where Is the Democrat Budget Alternative?

You have probably seen the news that Sen. Reid announced yesterday that he plans to submit the House Republican budget to a vote on the Senate floor.  Senator Reid also said that he views that same budget as “one of the worst things to happen to this country” – meaning the Majority Leader is apparently willing to take the risk of enacting what he views as horrific policy in order to make a political point.

It’s worth examining the budget alternatives that Democrats have put forward to date:

  • President Obama put out a press release: “After [House Budget Committee Chairman Paul] Ryan asked the White House budget office for more details, he was pointed to a news release.”
  • House progressives put forward a budget that relies almost exclusively on trillions of dollars in tax increases to reduce the deficit.
  • Senator Reid has not yet given his thoughts about the composition of a long-term budget blueprint – but we do know he wants to maintain funding for cowboy poetry.

The nation faces an imminent entitlement crisis – Medicare is already running tens of billions of dollars of deficits annually, and will be insolvent entirely within nine short years.  Given the paucity of credible deficit reduction plans put forward by Democrats, some would argue that the American people would be better served for the majority to put forward solutions, rather than just engaging in more political games.

Poll: Obama Medicare “Reform” Deeply Unpopular

This month’s Kaiser health tracking poll was released this morning, and it reveals some interesting data on entitlement reform.  While the survey, like others in recent days, shows mixed reactions to the House Republican budget depending on how the issue is framed, the Kaiser poll also examined one of the President’s key entitlement reforms.  Specifically, the poll asked whether the public would support “setting a limit, or cap, on the amount of money the federal government spends on Medicare and other health care programs…as a way to reduce the federal deficit.”  A clear majority (55%) of the public OPPOSED such caps, with the number strongly opposing (31%) more than double the number strongly supporting (14%).  When told that caps could mean “that seniors, low-income people, and others covered by federal health programs would have to pay more for their health care in the future, and some may have to go without care,” the level of opposition to caps on federal health spending rose to 73%, with only 19% supporting.

Of course, the health care law ALREADY imposes caps on Medicare spending – and President Obama wants to lower those caps even further.  Moreover, those caps will be enforced by a board of unelected and unaccountable federal bureaucrats. (Unfortunately the poll didn’t mention the role of federal bureaucrats in enforcing the law’s caps on Medicare spending – meaning the 73% opposition could actually be an under-estimate.)  America’s entitlement system is in need of fundamental reform – but this morning’s poll reveals that the American people are little interested in measures that simply place arbitrary caps on spending, enforced by unaccountable bureaucrats.

The Imperial Experts of IPAB — Or Why Ronald Reagan Was Right

This weekend a liberal blogger with the American Prospect wrote a post responding to Paul Krugman’s Friday New York Times column on the Independent Payment Advisory Board (IPAB).  The post argues that Congress cannot address policy issues (like how to control health care costs), meaning unelected bureaucrats like those on the IPAB should be granted unfettered power to do so themselves: “Despite many reasons for caution—the words George W Bush foremost among them—I’m becoming more of a believer in an imperial presidency in domestic policy.”  In other words, “imperial” bureaucrats like those on the IPAB should be permitted to enact whatever policies they want unilaterally.

Perhaps not surprisingly given the current debate surrounding the IPAB, liberal intellectual elitism along these lines has surged in recent weeks:

  • The White House’s defense of the IPAB talked about the “experts” who would make decisions on controlling costs in Medicare – and then claimed that “experts” agreed the IPAB was a positive tool for doing so.  (It’s entirely possible that the same “experts” praising the IPAB would be the same “experts” serving on it – meaning the arguments in the post could be viewed as the sound of one hand clapping.)
  • Krugman’s column also talked about a board of “experts” who would be charged with “saying no” to patient treatments – because patients are too feeble-minded to serve as consumers themselves.
  • The Post’s Ezra Klein asserted that “Patients don’t know enough…to say ‘no’ to what a doctor says they need” and argued one of the only ways to reduce costs was to create “systems where doctors and providers have to negotiate with the government” – because a bureaucracy can do a better job of controlling costs (through arbitrary price controls).
  • Former Speaker Pelosi claimed in a speech that “elections shouldn’t matter as much as they do.”

With entitlement reform at the center of a national debate, one of the central questions of the next two years is whether the American people want an “imperial” board of unelected but “expert” bureaucrats making their health care choices – or whether they want to preserve the power to make those decisions themselves.  The Great Communicator said it best:

“This is the issue of this election: whether we believe in our capacity for self-government or whether we abandon the American revolution and confess that a little intellectual elite in a far-distant capitol can plan our lives for us better than we can plan them ourselves.”

Obama’s Next CMS Administrator?

Press reports over the past several months have indicated that Senate Democrats are unlikely to act on the controversial nomination of Dr. Donald Berwick for a full-time appointment as CMS Administrator – in which case Dr. Berwick’s term in office would end with the expiration of his recess appointment next year.  However, the Administration may have found one possible replacement in an unlikely source late last week, when Paul Krugman wrote a column on health care, patients as consumers, and the inevitability of government rationing.  Clipped in full below my signature, this column should be a must-read for critics of the House Republican budget, as it sets out the only alternative vision developed by Democrats to date – one built around arbitrary rationing by government bureaucrats.  As the below spreadsheet shows, Dr. Krugman’s vision for health care as an outside observer closely aligns with the views of Dr. Berwick, the chief implementer of Democrats’ health care law:

 

  Paul Krugman Donald Berwick
Patients as Feeble-Minded Consumers “There’s something terribly wrong with the whole notion of patients as ‘consumers’ and health care as simply a financial transaction….Making [health care] decisions intelligently requires a vast amount of specialized knowledge.” “I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care. That is for leaders to do.”
Need to Enact Caps on Government Health Spending “The point is that choices must be made; one way or another, government spending on health care must be limited.” “The social budget is limited—we have a limited resource pool.”
Bureaucrats Rationing Care “We have to do something about health care costs, which means that we have to find a way to start saying no.” “The decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open.”

Krugman’s broader point is that bureaucrats will have to ration care because patients are incapable of functioning as health care consumers due to the technical nature of health care decisions, many of which are made in emergencies.  A response would go something like this: Of course patients will not function as pure consumers in all circumstances – the heart attack patient will obviously go to whichever emergency room an ambulance takes him.  But as Regina Herzlinger and others have pointed out, a small vanguard of the population functioning as educated consumers can drive important changes within the entire health care system – just as early adopters help spread technological innovations.  Put another way: You may not know the details of how a car works – I sure don’t – but a small percentage of educated consumers, and a ruthlessly competitive marketplace, can easily drive innovation while penalizing firms with lax attention to quality control.  (If Dr. Krugman cares to take issue with that comparison, I would be happy to provide him a copy of the latest innovation in government-run automobile manufacturing, to provide an illustration of what happens when bureaucrats micro-manage car companies, just as he would have bureaucrats micro-manage Medicare.)

The central debate around entitlement reform is whether patients or government bureaucrats will make the critical decisions in health care.  By setting out a vision closely mirroring the Administration’s, in language starker than the President himself has dared to use, Dr. Krugman has helpfully clarified the stakes for patients – and illustrated the fact that the Administration’s version of health “reform” will be far more costly to patients than the President would have most Americans believe.

Obamacare’s Perverse Incentives for Work — And Taxes

Daniel Kessler’s op-ed in this morning’s Wall Street Journal concisely makes the argument why the structure of insurance subsidies in the new health care law will reduce incentives to work.  Specifically, earning as little as $1,000 in income could cost a family more than $10,000 in insurance subsidies, due to what Kessler calls the “notches” at various income levels (a family at 399% of poverty gets a generous subsidy; a family with income of 401% FPL gets nothing).  The Congressional Budget Office agrees with this analysis, noting last June that “the phaseout of the subsidies as income rises will effectively increase marginal tax rates, which will also discourage work;” CBO’s best estimates are that 800,000 fewer jobs will exist thanks to the law’s perverse incentives.

There’s a related story here as well, and that’s this:  At a time when both Democrats and Republicans have talked about simplifying the tax code, the health care law substantially increased the economic distortions being funneled through it.  While the devilish details remain in flux, many observers in both parties support (at least in theory) reducing tax rates by eliminating tax expenditures.  Many economists agree that those tax expenditures, in addition to making the tax code more complex, also increase economic distortions, by subsidizing certain activities (e.g., buying hybrid cars) or by encouraging individuals to take other actions that they would not have engaged in absent an explicit federal subsidy.  The health care law does much the same thing – it encourages people NOT to work, or to funnel income into other activities (e.g., increasing 401(k) contributions), to report lower adjusted gross income and thus qualify for insurance subsidies.  That the abrupt phase-out of the insurance subsidies leads (at the “notches” at least) to an effective marginal tax rate of over 100% – as little as an extra dollar of income could cause a family to lose over $10,000 in federal insurance subsidies – makes the effect that much more acute.

President Obama claims he wants to simplify America’s tax structure, but by funneling the insurance subsidies through the tax code, the health care law he signed takes a major step in the opposite direction.  At a time when the economy faces continued sluggish growth, the last thing it needs is the distortionary effects of these ill-designed policies.

The Liberal Campaign AGAINST Seniors — and Medicare

The New York Times ran an editorial yesterday talking about a “real choice on Medicare” – and indeed it provided one, if perhaps unwittingly.  In comparing and contrasting the two parties’ views on health care and entitlement reform, the editorial included the following analysis:

“The two parties have very different approaches to what they would do with their [Medicare] savings.  The Democrats would use the savings to extend coverage to tens of millions of uninsured Americans, a goal we heartily endorse.  The Republicans say only that they would use the money in some way to bolster the solvency of Medicare.  That is not good enough.”

In other words, to the liberal editors at the Times, it’s “not good enough” to use savings from Medicare to ensure seniors receive the benefits they were promised – no, instead Medicare MUST be raided (through budgetary double-counting and other accounting gimmicks) to create unsustainable entitlements for millions more Americans.

Keep the New York Times’ “compassion” in mind the next time you read columns attacking Republicans for their budgetary choices – as I for one shall take no lessons on entitlement reform from an editorial board that views bolstering the solvency of a financially failing program as a moral shortcoming.

Who Decides: Bureaucrats or Patients?

The New York Times this morning has a good article and the Wall Street Journal an editorial highlighting the bipartisan opposition to the Independent Payment Advisory Board.  The board was created in the health care law to enforce an cap on overall Medicare spending; President Obama’s deficit plan proposed lowering the cap even further.  The Times piece features quotes from lawmakers in both parties expressing concern to the idea of unelected bureaucrats micro-managing the Medicare program.  Perhaps the definitive quote came from (of all people) Rep. Pete Stark, a self-described San Francisco liberal:  “In theory at least, you could set [Medicare] vouchers at an adequate level…But, in its effort to limit the growth of Medicare spending, the board is likely to set inadequate payment rates for health care providers, which could endanger patient care.”

Apart from the fact that even liberals won’t defend the IPAB – and believe a Medicare “voucher” may be superior to a Medicare program subject to payment cuts imposed by bureaucrats – other important questions remain:

  • The Times piece notes that “in general, federal courts could not review actions to carry out the board’s recommendations.”  That prohibition on judicial review is one of 14 separate instances in the health care law where Democrats acted to block patient lawsuits against bureaucrat decisions.  Why do Democrats OPPOSE enacting reasonable limits on private-sector lawsuits, but SUPPORT banning patients from suing government bureaucrats outright?  And if the IPAB will not harm Medicare beneficiaries, why did Democrats feel the need to prohibit patients from filing lawsuits against these bureaucrats’ proposals?
  • The Times also notes that the Administration “has yet to submit any nominations” for the IPAB.  If the IPAB will be so positive for Medicare and for seniors, why has the President failed to put forth his choices for the board he finds so important?  Last year President Obama nominated to head the Medicare program an appointee so controversial that Democrats refused to hold a confirmation hearingIs the President now deferring his IPAB selections until after his re-election – and if so, what does that say about the board’s unpopularity?
  • The Wall Street Journal editorial correctly points out that “decades of government faith in omniscient miracle workers” – aka government bureaucrats micro-managing prices for a $500 billion program – “has left Medicare in its present shambles.”  President Obama says he wants to “improve” Medicare, but with the Medicare program adding to the deficit by tens of billions of dollars – and scheduled to become insolvent entirely within the coming decade – how much more “improvement” by unelected bureaucrats can the program stand?

One of the fundamental questions surrounding entitlement reform involves the extent to which patients will control their health care choices, as opposed to unelected bureaucrats.  The fact that one of the House’s most prominent liberals suggested a Medicare voucher program could be preferable to the President’s approach should provide a cautionary tale to those who believe a panel of unelected officials can and should be allowed to manage the health care choices of millions of American seniors.

On Transparency and Waivers

Politico reported this morning that the Administration is weighing a draft executive order that would require government contractors to disclose their contributions to political groups. (As most unions don’t directly contract with the government, they would conveniently be exempted from this requirement, as would liberal organizations like ACORN and Planned Parenthood that receive government grants.)  The timing of this article is intriguing, as it comes one day after press reports noted that House Republicans have contacted outside industry groups asking them for details of their contacts with the White House regarding the health care law – because the White House itself rejected multiple requests from Congress to disclose documents, claiming such disclosure would require a “vast and expensive” undertaking.  So in sum: The Administration SUPPORTS requiring corporations (but not unions) to disclose their political contributions, but OPPOSES disclosing its own backroom dealings with unions and other special interest allies to get Obamacare passed.  Got that?

Separately, the Associated Press reported yesterday on another round of temporary Obamacare waivers granted by the Administration – this one to seniors in Medicare Advantage.  The multi-billion dollar “reprieve” granted by the Administration “could head off service cuts that would have been a [political] headache for Obama and Democrats in next year’s elections.”  (On a related note, doesn’t it appear slightly contradictory that the Administration is calling for a supposedly apolitical “panel of experts” to enforce caps on Medicare spending, while simultaneously increasing spending on Medicare Advantage to avoid political headaches during the 2012 campaign?)

Many may view both the latest round of waivers for seniors, and the Administration’s continued refusal to disclose information regarding its dealings with special interest groups, as a mere continuation of the backroom deals that epitomized Democrats’ unpopular 2700-page health care law.